Understanding Grocery Sales Tax
Tax Exemptions for Groceries
Many states’ laws say that anything that can be bought with either state or federal Supplemental Nutritional Assistance Program benefits qualifies as groceries and are tax exempt. But states get granular that sometimes they consider food items “ready to eat” if sold with utensils, but “grocery food” if sold without utensils. Eleven states include candy and soda in groceries: Arizona, Georgia, Louisiana, Massachusetts, Michigan, Nebraska, Nevada, New Mexico, South Carolina, Vermont, and Wyoming. Grocery taxes provide revenue for states, often funding education and transportation.
Variations in Tax Rates
Mississippi applies a 7% sales tax to groceries, making it the highest in the country. Alabama, Hawaii, Idaho, Kansas, Oklahoma and South Dakota tax at ordinary rates. However, some states offer credits offsetting tax for some people. Four states (Hawaii, Idaho, Kansas, and Oklahoma) tax groceries at the regular sales tax rate but offer credits or rebates offsetting some of the tax for some parts of the population.
Only five states have no sales tax: Alaska, Delaware, Montana, New Hampshire and Oregon.
States Without Grocery Tax:
- Alaska
- Delaware
- Montana
- New Hampshire
- Oregon
Like all taxes, sales tax is political. States often exempt tax on necessities like food, medicine and sometimes even clothing. A recent US trend has states like Virginia and Kansas either phrasing out or abolishing the state sales tax on groceries altogether.
The Complexity of State Taxation on Groceries
Currently 15 US states have some form of sales tax on groceries. Several of these states have no statewide sales tax on groceries but allow local areas to still require a sales tax on grocery sales. For example, in Georgia, groceries are not taxable at the state level. But individual counties and other jurisdictions are still allowed to require sales tax on grocery purchases.
Which state in the USA has no sales tax? Alaska
Are groceries taxed in Texas? Flour, sugar, bread, milk, eggs, fruits, vegetables and similar groceries are not subject to Texas sales and use tax. Tax is due, however, on non-food items.
What are the 7 tax free states? Florida is another state where grocery food is generally tax exempt.
Three states that tax groceries at the same rate as their general sales tax — Hawaii, Idaho, and Oklahoma — enable residents to offset the high price of groceries with tax credits.
Missouri taxes groceries at a reduced rate. Kentucky taxes alcoholic beverages but exempts most grocery items. California taxes “hot prepared food products” at 7.25% plus local district taxes whether for takeout or eating in store.
Tax-Free Shopping and Special Considerations
Despite no national tax-free shopping in the US, shoppers spending $100-$150 at most malls can get a 9.5%-14% discount. Local taxes on diapers can be up to 11% in Oklahoma and 10.9% in Missouri. Most states exempt candy, tobacco, alcohol, soft drinks, prepared foods and vending machine items from grocery tax exemptions.
Two types of retailers can maximize tax-free shopping: IRS-approved retailers like Target and Walmart, and duty-free shops. Back in the 1970s the average monthly grocery bill was significantly lower than it is now, reflecting both inflation and changing consumption patterns.